The benefits of free trade are greater than the costs, but the benefits tend to be diffused throughout the economy while the costs are concentrated. The people who incur the costs are often, therefore, passionate opponents of trade. If offering them subsidies dampens their opposition, everyone can be a winner: They let free trade go through, and its net benefits are larger than the cost of the subsidies.
Yet we are not fans of the latest proposal to expand these subsidies. Sen. Max Baucus (D., Mont.), the chairman of the Finance Committee, wants to double federal spending on Trade Adjustment Assistance. But there is no deal in the works here: Baucus is not making these new subsidies contingent on any expansion of free trade.
And taken as a stand-alone, these subsidies make no sense. Why does a worker who loses his job to foreign competition have any greater claim on public support than a worker who loses his job to domestic competition? Or, for that matter, a worker who loses his job as a result of technological change in his industry? Or the declining popularity of his product? Sen. Olympia Snowe (R., Maine) argues that we have an obligation to help the worker who loses his job to imports because free trade is a “policy choice.” But this is no answer at all. Allowing domestic competition is a “policy choice” too. And when protectionism costs jobs — when steel tariffs throw workers in steel-using industries out of work, for example — none of the losers from that policy gets a special government check.
An additional problem is that much of the extra money spent will go to federal job-training programs, which may not truly constitute “help” since they rarely have any positive effects on trainees.
This Congress has shown very little interest in liberalizing trade, even when the Bush administration has gone more than halfway to meet Democratic objections. If expanded subsidies are part of a deal to go forward on trade deals with Colombia, Peru, and South Korea, and to renew the president’s authority to negotiate more trade deals, it is a price worth paying. If Democrats will not commit to a deal, on the other hand, then Trade Adjustment Assistance becomes mere fodder for propaganda about how trade is ravaging the country and leaving victims everywhere. Let’s not waste the money.